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5. Aisin Seiki Co., Ltd. Business Report FY ended Mar. 2018

Aisin Seiki Co., Ltd. Business Report FY ended Mar. 2018

Aisin Group's Business Restructuring Program

-Reorganizing the following three segments:

• Manual transmission business: integrating Toyota's development and production functions into Aisin AI
• Brake business: integrating development and production functions of Toyota, Denso, and Aisin Seiki into Advics
• Body parts business: Aisin Seiki converting Shiroki Corporation into its wholly owned subsidiary

Reorganizing Domestic Production Structure
-The Company announced the details of its virtual company (VC) system to be launched with other Aisin group companies on April 1, 2017. Four inter-organizational companies to be set up for each core business will collaborate in research and development and business operations. Four presidents have been appointed to head up each company. Kazuhisa Ozaki, currently director and senior managing officer at Aisin Seiki (to become president of Aisin AW in June) will assume the presidency at the Powertrain VC; Satoshi Ogiso, currently president of ADVICS Co. Ltd., will be president of the Driving Safety VC; Masahiro Nishikawa, currently senior managing officer at Aisin Seiki, will become president of the Car Body VC; and Hiroshi Uenaka, currently senior managing officer at Aisin Seiki, will take the post of president of the Information and Electronics VC. (From an article in the Nikkan Jidosha Shimbun on February 25, 2017)

>>>Financial Forecast for the Next Fiscal Year (Sales, Operating Income etc.)

-In the fiscal year that ended in March 2018, the Company spent JPY 260.3 billion in capital expenditures, mainly to produce and revamp new products, and to develop new technology and new products.

Investments in Japan

-Aisin Seiki and Advics announced that they are planning to expand Advics Handa plant and reorganize production operations in Handa area, Aichi prefecture. This is with the aim of enhancing production of controlled brake system, electric pump, motor and ECU. Aisin Seiki will invest approximately JPY 22 billion in this plant and will lease the facility to Advics. The expansion work of 61,600 square meters is expected to be completed in January 2019 and Advics will produce products of ABC & ESC business such as cooperative regenerative braking system and ESC modulator. (From a press release on November 24, 2017)

-Aisin Seiki Co., Ltd. (Aisin Seiki) announced that a south building at its Nishio die casting plant has been put into service. Construction on the new extension began last year. All seven production lines are scheduled to begin operations by March 2018. The Nishio die casting plant has a production capacity of about 100,000 tons. The new south building will have a production capacity of 13,000 tons. As a result, the overall production capacity of the Nishio plant will increase by a little over 10%. Aisin AW Co., Ltd., a subsidiary of Aisin Seiki, is rapidly boosting annual production of passenger car automatic transmissions to around 10 million units. Aisin Seiki has been extending the Nishio plant to increase supply of automatic transmission cases and other aluminum die cast parts. The investment in this project will amount to JPY 11.5 billion. (From an article in the Nikkan Jidosha Shimbun on August 28, 2017)

-The Company announced that it has opened a new laboratory called the "V-lab" in its headquarters area in Kariya City, Aichi Prefecture. The investment for the building is about 4.5 billion yen. The laboratory will be equipped with facilities and start operations accordingly. At the V-lab, Aisin Seiki will focus on the advanced development of promising next-generation technologies like "zero emission," "autonomous driving," and "connected" technologies, and pursue development of new products and technologies with its group companies. The company's first focus is on the development of the "Intelligent Parking Assist" system by combining sensors and actuators. (From an article in the Nikkan Jidosha Shimbun on August 3, 2017)

Investments outside Japan

-Aisin Seiki Co., Ltd. and Aisin AW Co., Ltd. have established a JPY 5.5 billion venture fund with Fenox Venture Capital, which invests in technology startups primarily in Silicon Valley, the U.S. The Aisin Group established the venture investment fund to accelerate the speed of its access to cutting-edge technologies in the world and encourage partnerships that will result in the development of the automotive industry. The JPY 5.5 billion fund will target startups around the world in the areas of automotive related technologies, such as autonomous driving, zero-emission, connected vehicle, artificial intelligence, augmented reality/virtual reality, and other cutting-edge technologies that require hardware-software collaboration. (From an article in the Nikkan Jidosha Shimbun on March 10, 2018)

-Aisin Drivetrain (ADI) announced it is investing USD 16 million to expand its operations in Crothersville, Indiana, creating up to 47 new jobs by the end of 2018. ADI, a subsidiary of Aisin Seiki Co., manufactures automotive components and systems, including transmissions and power steering columns. The company supplies components for the Toyota Avalon and Lexus ES. Since 2008, ADI has invested nearly USD 80 million into its Indiana operations. Including ADI, Aisin has 10 companies in Indiana, including Aisin USA Manufacturing in Seymour, Aisin Chemical Indiana in Crothersville, ATTC Mfg. in Tell City, ADVICS in Terre Haute, Aisin Logistics in Franklin, and INTAT Precision in Rushville. (Indiana Economic Development Corp. release on February 7, 2018)

-FT Techno of America, an Aisin Group company, announced that it is proceeding to build a new USD 5 million test track for advanced driver assistance systems (ADAS) and autonomous vehicle technology at its proving grounds near Fowlerville, Michigan. The new test track will feature connected traffic infrastructure, such as stop lights that communicate with vehicles, freeway ramps, a five-lane signaled intersection, a four-way stop intersection, a roundabout and a multi-use dynamic pad that can be customized to test a range of traffic scenarios. (Detroit Free Press article on February 6, 2018)

-Aisin Seiki Co., Ltd. (Aisin Seiki) announced that it will jointly establish an investment fund company in Silicon Valley, the U.S., for start-ups with its subsidiary, Aisin AW Co., Ltd. (Aisin AW), in February. The two companies are aiming to utilize advanced technology by cooperating with start-ups that have advanced techniques in the fields of electrification, artificial intelligence, and information communication. The new company will be called "Fenox Venture Company XX, L.P." and have about JPY 5.5 billion in capital. Aisin Seiki and Aisin AW will own 49.5% each, and Fenox Venture Management XX, LLC 1%. This will be the first time for the Aisin Group to establish an investment fund company. The new company will invest mainly in the U.S., Asian, and European start-up companies. (From an article in the Nikkan Jidosha Shimbun on January 24, 2018)

-In the fiscal year that ends in March 2019, the Company plans to spend JPY 390.0 billion in capital investments, which is a 49.8% y/y increase. The money will be spent mainly to produce and revamp new products, and to develop new technology and new products.